Over the past four years, it seems that everyone has been demanding that something be done to "fix Wall Street," and Dodd-Frank and Occupy Wall Street, it would appear, have not been sufficient. The Justice Department hasn't actually convicted any of the high-profile bankers who played a large part in the financial crisis, and data from the IMF suggests that the capital markets are no less vulnerable to crash and fraud than they were in 2008. Despite aggressive rhetoric from the White House, the Obama Administration has opted to go after institutions rather than individuals. This method has prompted criticism due to the fact that such settlements don't involve any actual admission of wrongdoing and the dollar amounts they cost banks are really not all that significant. Take, for instance the $25 billion foreclosure abuses settlement with Wells, Ally Financial, Citibank, BofA, and Chase. There's also the issue of time, money, and expertise. It's much more expensive and logistically difficult to go after a plethora of individuals. In the post-9/11 era, the FBI and Justice Department have been focused mainly on counter-terrorism, a whole other can of worms. In addition, insiders cite pure and simple fear of financial institutions failing if they were indicted and the resulting effects on the already-precarious global markets.

Wall Street often points to lenders offering lax guidelines, or not underwriting loans to published criteria. There is some argument there. But in the halcyon days of pre-2007, it was possible to be given a mortgage loan with little more than a credit score--no verification of income or assets required. To make a gross understatement, things have changed since then, and many borrowers are having difficulty qualifying for loans due to "hyper-strict" lender underwriting standards. With 30-year mortgage rates at historic lows, some are hopeful that banks might be relaxing those standards, but industry data actually points in the other direction. The average credit score on new loans closed in August 2012 was 750, nine points higher than August 2011. When analyzing a sample from Fannie Mae and Freddie Mac, which dominate the conventional loan market, the average score is 763, a point higher than it was a year ago. For reference, less than 22% of consumers have credit scores over 749. A sizeable chunk of the population are therefore unlikely to qualify for a mortgage should they want to purchase a home, long touted as part of the American Dream.

Data on down payments reflects a trend towards tighter requirements as well. Back in 2005, the median down payment percentage for American borrowers was a mere 2%, and 43% of borrowers put down nothing at all. Compare this to the most recent numbers from Fannie Mae and Freddie Mac borrowers, who on average put down 21% and had clean debt-to-income ratios. The actual time it takes to process a mortgage loan has also increased. The more checks in place, after all, the more time it takes to review them. Underwriters doing 6-8 loans per day have turned into auditors doing 2-3 files per day. From August 2011 to August 2012, the average time it took a loan to close from its application date increased from 40 to 49 days. The time it took to process a refinance increased from 37 to 51 days. Indeed, frustrated would-be buyers are saying, "but when will lenders start to loosen their standards?" Eventually, lenders will probably relax a bit about potential regulatory requirements*, have fewer fears about expensive "buyback" demands from Fannie Mae and Freddie Mac, and remove some of the fees associated with extra credit risk. For the time being, however, don't count on anything.

* As of the second quarter of 2012, only one third of the regulations contained in the Dodd-Frank Act have actually been implemented. Mitt Romney alluded to the business-strangling nature of Dodd-Frank during the recent presidential debate.

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